Net Connect Installation Inc. v. Mobile Zone Inc., 2017 ONCA 766

Court of Appeal for Ontario

Date: October 3, 2017 Docket: C63190

Judges: Hourigan, Roberts and Nordheimer JJ.A.

Parties

Between

Net Connect Installation Inc. Plaintiff (Respondent)

and

Mobile Zone Inc. and Mohammad Shahzad and Swati Damle Defendants (Appellants)

And Between

Mobile Zone Inc., Mohammad Shahzad and Swati Damle Plaintiffs by Counterclaim (Appellants)

and

Net Connect Installation Inc., ICT North Inc., Wayne LaPlante and Charleen Wunderlich Defendants to the Counterclaim (Respondents)

Counsel and Hearing

Counsel:

• Ralph Swaine, for the appellant
• Christopher Salazar, for the respondent

Heard and released orally: September 29, 2017

On appeal from: The judgment of Justice Guy P. DiTomaso of the Superior Court of Justice, dated November 30, 2016.

Reasons for Decision

Overview

1This is an appeal of an order granting summary judgment to the respondents for damages and other related relief. The appellants also seek leave to appeal the full indemnity costs award made against them in the amount of $144,991.

The Agreement and Motion Judge's Findings

2This case involves an oral agreement between the parties regarding the sale and installation of Shaw Cable packages in Ontario. The motion judge found that the appellants were in breach of the agreement and had misappropriated funds owing to the respondents under the agreement. He further found that the appellants owed monies to the respondents pursuant to loans made by the respondents.

Issues on Appeal

3On appeal, the appellants submit that the motion judge erred in:

(I) finding that the agreement was not a joint venture;

(II) finding that the appellants breached the agreement;

(III) finding that the agreement was not varied by further agreements made in March and November 2013;

(IV) finding that one of the appellants, Swati Damle, impermissibly dissipated her assets; and

(V) awarding judgment to a non-party.

Standard of Review

4The agreement between the parties is not a standard form contract. Accordingly, absent an extricable legal error, the motion judge's findings are entitled to deference from this court. The palpable and overriding error standard of review applies: Heritage Capital Corp. v. Equitable Trust Co., 2016 SCC 19, [2016] 1 S.C.R. 306, at paras. 21-24.

Analysis of Issues (I), (II), and (III)

5The motion judge conducted a very thorough review of the evidence regarding the contractual arrangements entered into by the parties. With respect to issues (i), (ii) and (iii), we see no legal error or palpable and overriding error in the motion judge's analysis. Specifically, in reaching the conclusion that the parties were not engaged in a joint venture, the motion judge found that there was no common undertaking, no mutual control, and no expectation to share in profits. These findings were available on the record. The appellants' argument that there had been a breach of the agreement is premised on the incorrect notion that the parties were engaged in a joint venture. Further, the motion judge's finding that there had not been variations to the agreement in March and November 2013 was also available to him on the record and the appellants have not identified any error he made in making that finding.

Analysis of Issue (IV) – Asset Dissipation

6With respect to the finding that Ms. Damle impermissibly dissipated her assets, the evidence establishes that she sold and encumbered properties during the course of these proceedings. In any event, in determining the issues among the parties the motion judge did not rely upon that finding other than as one ground among many in support of his costs award. For the reasons discussed below, we decline to grant leave to appeal costs.

Analysis of Issue (V) – Judgment to Non-Party

7We are of the view that the motion judge erred in making his damage award in favour of all of the respondents, as only the corporate litigants were parties to the agreement. Accordingly we order the judgment be varied to remove the handwritten amendment in paragraph 3.

Costs Award – Full Indemnity Costs

8While we would not interfere with the costs award made by the motion judge, we would express a cautionary note on this issue. In this case, the motion judge awarded costs on a full indemnity basis. There is a significant and important distinction between full indemnity costs and substantial indemnity costs. An award of costs on an elevated scale is justified in only very narrow circumstances – where an offer to settle is engaged or where the losing party has engaged in behaviour worthy of sanction: Davies v. Clarington (Municipality), 2009 ONCA 722, 100 O.R. (3d) 66 (C.A.) at para. 28. Substantial indemnity costs is the elevated scale of costs normally resorted to when the court wishes to express its disapproval of the conduct of a party to the litigation. It follows that conduct worthy of sanction would have to be especially egregious to justify the highest scale of full indemnity costs.

9In this case, full indemnity costs were warranted given the factual findings that the motion judge made regarding the conduct of the appellants, especially the movement of funds out of the country in an effort to place them out of reach of the respondents and the instances of fabricated evidence. We would reiterate, however, that it is only in rare and exceptional cases where such a costs award is justified.

Disposition – Leave to Appeal Costs

10Leave to appeal the costs award is dismissed.

Disposition – Appeal

11The appeal is dismissed, other than the amendment to the judgment below.

Disposition – Funds and Mareva Injunction

12Counsel for the respondent sought an order that the funds paid into court by order of Justice Cronk on June 23, 2017 be paid out of court to his law firm in trust. The appellants' counsel does not oppose that order, provided that the Mareva injunction currently extant against his clients referenced in para. 11 of the judgment appealed from is lifted. The respondents do not oppose the lifting of the Mareva injunction. Accordingly, an order will go paying out of court the funds ordered into court by Justice Cronk on June 23, 2017 to be paid to the respondents' law firm in trust. An order will also go lifting the Mareva injunction against the appellants, once the payment out of court has been made.

Disposition – Costs of Appeal

13The appellants shall pay costs of the appeal to the respondents in the amount of $20,000, inclusive of fees, disbursements and taxes.